NAB forecasts cash rate will be cut in May 2026 as ‘higher-than-expected’ CPI figures pour cold water on rate cut hopes

NAB has ruled out further rate cuts for the rest of the year, pushing back the timing of the Reserve Bank’s next relief to May next year amid “higher-than-expected” CPI data. The bank initially forecast additional rate cuts in November, then February 2026 But in its latest forecast, NAB has pushed back the timing of the next cut to May after grim headline inflation figures were revealed by the Australian Bureau of Statistics (ABS) on Wednesday. According to the latest monthly Consumer Price Index (CPI) indicator, headline inflation rose to an annual rate of 3 per cent – up from 2.8 per cent the previous month. It marks the highest level since July 2024. Canstar’s data insights director, Sally Tindall said the figures have popped any chance of a September rate cut. “The RBA doesn’t put much weight on the monthly data, but these results are difficult to ignore out of hand and the Board isn’t going to take risks with inflation,” Ms Tindall said. “It’s a stark reminder of how quickly forecasts can change. NAB might be right. It also might be wrong, but what this change in forecast is, is a wake-up call that if you want a rate cut before Christmas, you might need to get it yourself.” The other three big banks still expect a further cut to the cash rate in November, with Commonwealth Bank and ANZ expecting the rate to be cut to 3.35 per cent. Westpac forecasts a cut to about 2.85 per cent. But Commonwealth Bank has since acknowledged such a move from the RBA is not guaranteed and will be “highly dependent” on the data flow. An analysis by Canstar reveals an owner occupier who has not switched or renegotiated their rate since the start of the 2022 hikes is on a variable rate of 6.36 per cent. TAD-1336 Inflation Graph “Owner-occupiers sitting on rates above 6 per cent could be throwing away thousands of dollars out of loyalty.” Wednesday’s spike in inflation was attributed to the end of state energy rebates, ABS head of price statistics Michelle Marquardt said following the release. “The annual rise in electricity costs is primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs in August 2025 than they did in August 2024,” she said. “In August last year, state government electricity rebates were in place for Queensland $1000, Western Australia $400 and Tasmania $250.” Housing (4.5 per cent), food and non-alcoholic beverages (3 per cent) and alcohol and tobacco (6 per cent) were the largest contributors to annual inflation. Treasurer Jim Chalmers said Wednesday’s inflation reading was “within the range” of market expectations and talked about the more reliable quarterly data. “We know that monthly inflation figures can be more volatile and less reliable than the quarterly figures because they don’t compare the exact same basket of goods and services from month-to-month,” he said. “The more reliable quarterly data shows that both headline and underlying inflation have remained within the target band for the six months to June.” The Reserve Bank will next meet on September 30.